Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their Digital Tax Account. This has been portrayed as the end of tax returns. You only have to look at payroll reporting to know that the opposite is going to be the case. All payments to employees have to be reported to HMRC under the Real Time Information system on or before the date the workers are paid. This increases the administrative burden for employers. No longer can businesses bury their heads in the sand and and wait for the year end to reconcile their wage payments.
If you are not already using cloud software that connects to a separate bank account used for your business, you should consider changing the way you record your accounts now! Online accounting software such as Xero will automatically pick up transactions from your bank statement and keep your accounts up to date. If you currently keep your records on pieces of paper until the end of the year, this isn’t going to fit with the proposed Digital Tax Accounts. The whole reason for Digital Tax Accounts is to allow HMRC greater access to your accounts and make it easier for them to collect tax. Unfortunately for small businesses, this will increase the amount of work they have to do.
The best way of making sure that you are prepared for Digital Tax Accounts is to get your financial records in order now. Most people are more likely to need an accountant as they will no longer be able to stay under the radar and away from the scrutiny of HMRC. To get advice on setting up online accounts, please get in touch using the contact form at the bottom of this page.
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